The policy update will allow customers to claim up to £10,000 if they need to cancel their holiday due to a positive Covid-19 test in the 14 days before their drip departure date.
Policyholders will be able to claim the remaining value of their holiday in cases when they contract the virus while abroad and need to come home early.
This comes as Saga announced it would include medical treatment and repatriation costs for Covid-19 as standard back in June.
The company said it was responding to customer demand, as cancellation cover was named the second most important thing insurers should offer during the pandemic. Saga added it would review the policy terms as travel advice continues to change.
Saga Health and Travel Insurance’s Head of Product, Kevin McMullan, said: “With travel restrictions continually changing, many people may be worried that much-anticipated holiday plans could be cut short, or increasingly reluctant to go at all. Now more than ever people need to feel confident and reassured when planning to travel overseas.
“Our new policy terms mean all new customers will be covered with up to £10,000 of cancellation cover should they fall ill with coronavirus in the 14 days before they depart. While they’re abroad, they’ll also be covered for any medical costs as a result of Covid-19.
“We’re continuing to review and update our products to ensure they reflect the needs of our customers. However, we know the impact of coronavirus is far-reaching. We’d encourage customers to contact us directly if they’d like to discuss their individual circumstances and how we can best support them through these uncertain times.”